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More changes and innovations in ECC3 This article, which is a continuation of the authors' previous article, highlights more key differences between the NEC3 Engineering and Construction Contract (ECC3) and the 2nd edition (ECC2). Amended compensation event provisions A number of changes have been made to the sub-clause 60.1 list of compensation events;
Sub-clause 61.3 now provides clarity in that a time-bar provision exists. Where only the contractor becomes aware of an event that could lead to a compensation event for a change in the prices and/or completion / key date, then notification must be made to the project manager within eight weeks of the contractor becoming aware of the event, or no entitlement thereafter is due. Take over and reduction of delay damages New sub-clause X7.3 provides for a situation where the employer takes over part of the works before completion of the whole of the works. The delay damages will be reduced to reflect the benefit derived by the employer from that part of the works taken over. It is for the project manager to assess this benefit and the calculation is unlikely to be a straight, pro-rata deduction. Subcontractors The definition of 'subcontractor' in sub-clause 11.2(17) has now been clarified such that it can mean either a constructor/installer of part of the works or a provider of services necessary to provide the works. Sub-clause 26.3 has also been amended such that the contractor submits proposed subcontract conditions to the project manager where an 'NEC contract' (e.g. Engineering and Construction Subcontract, Engineering and Construction Short Subcontract, Professional Services Contract or Term Service Contract) is not used rather than specifically named NEC contracts in ECC2. Defined cost ECC3 now sensibly uses the definition 'defined cost' throughout instead of the ECC2 definition of 'actual cost'. This gives clarity to the fact that defined cost is not actual open-book cost, but is a definition of cost falling within certain cost categories. Added to this are corresponding bespoke overhead insertions from the contract data, all in relation to a final product of total cost using the schedule of cost components (SCC) or shorter schedule of cost components (SSCC). ECC3 follows the same principle as ECC2 in that each of the main options A to F inclusive has a unique definition of defined cost. ECC3 now distinguishes between a SCC and a SSCC. For an ECC3 option A or option B contract, the SCC is expressly excluded and only the SSCC is used for compensation-event assessment. For ECC3 options C, D and E (cost-reimbursable contracts), the SCC is expressly stated within defined cost for generating the price for work done to date. The SCC is also used for compensation-event assessment, but the SSCC can be used by agreement. Also for ECC3 options C, D and E, defined cost now includes clarification that it is the gross cost amount of a subcontractor without deductions for;
ECC3 option F (management contract) also includes identical provisions with respect to gross cost amount of a subcontractor, within defined dost, but in addition defined cost now also includes prices for work done by the contractor itself. Contract data part 2 for option F now specifically requires the contractor to state what work it plans to do itself. Access ECC3 now uses the contract-data-identified term of 'access date' and not the ECC2 identified term of 'possession date'. Although the term access date is used throughout ECC3, the most significant use of the identified term corresponds to ECC3 sub-clause 33.1. The nature of the contractor's interest in the site is only a licence to occupy and 'possession' does not mean exclusive or absolute possession as ECC3 provides for the employer and others to use the site. It is presumed that this change alleviates the legal connotation of the word 'possession', which might imply exclusive rights to use the site. Instead of 'the employer gives possession of each part of the site', the words 'the employer allows access to and use of each part of the site' are used in ECC3. Option X12 partnering ECC3 option X12.3(7) partnering now includes an express obligation for the contractor (as an option X12 partner) to change its programme where this proves necessary due to the core group timetable (or subsequent revision) for contribution of the partners. There is a stated compensation event for such programme change in sub-clause X12.3(7), however the parties acknowledge that compensation event may lead to reduced prices. Option Y(UK)3 The ECC2 position with the inclusion of option Y(UK)3 (addendum at April 2000) as a secondary option specifically excluded the right of a third party to enforce a term of ECC2 under the Contracts (Rights of Third Parties) Act 1999. The ECC3 position still includes an option Y(UK)3, but this now reverses the Y(UK)3 April 2000 provision and a third party may enforce a term of ECC3 only if details are included within the contract data. This is obviously specific to UK contracting only. Defects In ECC2 the supervisor had the power to instruct the contractor to search and it is now clarified as to what it is the contractor is searching for. ECC3 sub-clause 42.1 states 'until the defects date, the supervisor may instruct the contractor to search for a defect'. The express reciprocal obligation placed upon the contractor and the supervisor under ECC2 of defect notification 'which he finds' is now clarified expressing immediacy under ECC3 sub-clause 42.2, where the words 'as soon as he finds it' are used. ECC2 states 'the supervisor issues the defects certificate at the later of the defects date and the end of the last defect correction period'. ECC3 sub-clause 43.3 now extends this provision, for clarity, with the words 'the employer's rights in respect of a defect which the supervisor has not found or notified are not affected by the issue of the defects certificate' - the contractor retains liability for any unfulfilled obligations and for latent defects within the statutory period of liability. ECC3 sub-clause 43.4 now provides clarity that where the employer has taken over the works or any part thereof, it allows the contractor access for correcting a defect. The defect correction period then begins when the necessary access has been provided by the employer. ECC3 sub-clause 45.1 is now extended to clarify the position when the project manager assesses the cost to the employer of having a defect corrected by other people (for which amount the contractor pays the employer), as a result of undischarged obligations (i.e. the contractor has not corrected a notified defect within the defect correction period) - there is now a deeming provision, namely 'the works information is treated as having been changed to accept the defect'. ECC3 sub-clause 45.2 is a wholly new provision in that if the contractor is not given access to correct a notified defect by the employer before the defects date, the project manager assesses the cost to the contractor of correcting the defect and the contractor 'pays this amount'. As with ECC3 sub-clause 45.1, there is a deeming provision included, namely 'the works information is treated as having been changed to accept the defect'. Completion The definition of 'completion' in ECC3 sub-clause 11.2(2) now not only contains the ECC2 restriction for the correction of notified defects which would have prevented the employer from using the works but also now includes corrected notified defects which would have prevented others from doing their work. The definition of completion also now includes a default statement whereby, if the works information is silent with respect to the criteria for completion, then a judgement is introduced for the project manager's decision such that 'completion is when the contractor has done all the work necessary for the employer to use the works and for others to do their work'. Working areas The definition of 'working areas' in ECC3 in sub-clause 11.2(18) now includes a statement that such areas are only permitted where they are 'necessary for providing the works' and 'used only for work in this contract'. Such restrictions also apply to any contractor proposal for working area additions to the project manager, post contract date (ECC3 sub-clause 15.1). This assists clarity, as problems have arisen on accepting working areas in ECC contracts (e.g. compensation-event evaluation and title to plant and materials) where such areas have multiple use, that is, not solely used for the ECC contract. The ECC3 amendments are in response to the most obvious misuse by the contractor of attempting to include its head office establishment/plant yards and so on in working areas. The contract ECC3 now contains, for clarity, an express provision that no variation to the contract is effective until it has been 'agreed, confirmed in writing and signed by the parties' (ECC3 sub-clause 12.3). The contract now contains an 'entire agreement' provision at clause 12.4. Programme ECC3 sub-clause 31.2 contains several differing statements with respect to programme submission requirements over those statements included within ECC2. The term 'access dates' is used instead of 'possession dates' and the contractor now also has to include 'key dates' on the programme and the date by which fulfilment of a condition stated for a key date is to be met. The programme submission now provides absolute clarity that the work of others is as last agreed with them by the contractor - only on non-agreement are the statements in the works information referred to by default. The contractor only now states when information from others is required to meet the programme for the completion date. The most significant amendment however is the now less onerous 'statement' (not 'method statement') of how the contractor plans to do the work against each 'operation', with 'principal equipment' being the expression used for project manager identification (not the categorical 'equipment' down to the last detail). For further information please contact the NEC office on 020 7665 2446 or email nec@neccontract.com. [ECC3] ECC3 uses 'defined cost' instead of 'actual cost' |
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